The reform of the French retirement system: 5 years later
Our first-ever issue of Le Satellite examined the 2003 reform of the French retirement system. How has this system changed 5 years later?
Overview of the 2003 reform
France has no single, universal and compulsory pension plan for all workers. The main plan covers private sector workers, who account for 65% of all French workers. Pensions vary depending on length of contribution and age at retirement. Workers are entitled to a full pension after 40 years of contribution or if they are 65 when they retire.
The 2003 reform sought to standardize for all plans the number of years of contribution giving entitlement to a full pension. Increased to 40 in 2008, this number will rise to 41 between 2009 and 2012. The number of years will then increase in step with gains in life expectancy.
By penalizing early retirement, the reform encourages older workers to work longer.
Pending measures
The 2003 reform mainly involved the public plan and public service plans. It did not address special pension plans. As a result, 3 main goals remain for 2008:
Guarantee the financial viability of pension plans;
Ensure fairness and solidarity between contributors and between generations in particular;
Increase the employment rate of older workers.
To achieve the last goal, the plan for re-establishing solvency includes 2 interesting measures:
- Phased retirement enabling workers over age 60 to work part-time while receiving a partial pension;
- Increasing the surcote,1 which allows a 5% increase for each year worked after age 60 for contributors with over 40 years of contribution.
The importance of information
The 2003 reform stressed freedom of choice regarding the age of retirement. This required that specific information be provided on contributors' retirement rights. In this regard, several measures were put in place to enhance information delivery, including:
- A public interest group bringing together organizations that manage pension funds and those responsible for paying public servants' pensions;
- A retirement simulator put online in June 2006. It receives around 6 000 visits a day.
The Régie's stance on the reform
The French retirement system is faced with major problems that have made it necessary to extend the contributory period to 41 years. In reality, however, the average age at retirement is expected to barely increase by 0,2 years in the private sector and 1,5 years in the public sector. To prevent regular hikes in contribution rates, new reforms and a review of early retirement incentives will have to envisaged.
Currently, several social measures fail to encourage older workers to continue to work, mainly the job search system for unemployed workers over age 57. In addition, a number of companies have refused to provide training to workers at the end of their career.
On the other hand, the French parliament has adopted a new measure requiring that 8% of a business's employees be 55 and over. Now it remains to encourage French workers to stay longer in the labour force.
Source: Le Satellite, Direction de l'évaluation, de la statistique et de la révision, Régie des rentes du Québec, vol. 6, no 1, March 2008.
- An increase in the future pension of a contributor at least 60 years of age who chooses to continue to work even though he or she is entitled to a full pension.